New rules on payday lending are welcome

Research suggests that only a small proportion of applicants are asked to prove they can afford to borrow

Share

“The clock is ticking” for payday lenders, according to Martin Wheatley. The head of the newly created Financial Conduct Authority has put the sector “on notice” that tougher regulation is on the way. Not a moment too soon.

There is a place for short-term, unsecured loan facilities – in helping meet the cost of a domestic emergency, say, or even simply to ease cash-flow problems. But there is a balance to be struck. Too often borrowers are left paying rates as high as 4,000 per cent, trapped in a cycle of debt as loans are repeatedly “rolled over”.

Since the financial crisis – with recession squeezing incomes and banks wary of lending – the number of payday loans issued each year has shot up ten-fold. But it is estimated that as many as a third of borrowers are left worse off. Damning research from the Citizens Advice Bureau, published earlier this year, also suggests that only a small proportion of applicants are asked to prove they can afford to borrow. Such things are not the hallmarks of an effectively self-regulating industry.

To combat some of the most egregious problems, Mr Wheatley proposes to enforce proper affordability checks, to limit the number of times a loan can be rolled over and to clamp down on misleading advertising. All are more than justified.

The payday-loan industry – the reputable part of it, at least – has responded with cautious acceptance, leading some campaigners to suggest that the new rules cannot be tough enough. Not so. Unsavoury as their services may seem to many, if the likes of Wonga are regulated out of existence, their customers may turn to more dangerous loan sharks instead. And that would be even worse.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

SThree: Graduate Recruitment Resourcer

£20000 per annum + commission: SThree: Sthree have an exciting opportunity for...

Recruitment Genius: Plumbing & Heating / Bathroom Trade Counter Sales

£22000 - £26000 per annum: Recruitment Genius: This well established London ba...

SThree: Trainee Recruitment Consultant - Dublin (based in London)

£20000 - £25000 per annum + commission: SThree: Real Staffing's Pharmaceutical...

Recruitment Genius: Telesales Executive - OTE £32,000+

£18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...

Day In a Page

Read Next
 

Children shouldn’t even know the word 'diet' — obesity and lack of body confidence are symptoms of the same cause

Natasha Devon
Rihanna, Nicki Minaj, Madonna, Deadmau5, Kanye West and Jay-Z at the Tidal launch event in New York  

Tidal: An overpriced music streaming service that only benefits the super-rich members of a messianic-like cult? Where do I sign up??

Michael Segalov
General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?
How Tansy Davies turned 9/11 into her opera 'Between Worlds'

How a composer turned 9/11 into her opera 'Between Worlds'

Tansy Davies makes her operatic debut with a work about the attack on the Twin Towers. Despite the topic, she says it is a life-affirming piece
11 best bedside tables

11 best bedside tables

It could be the first thing you see in the morning, so make it work for you. We find night stands, tables and cabinets to wake up to
Italy vs England player ratings: Did Andros Townsend's goal see him beat Harry Kane and Wayne Rooney to top marks?

Italy vs England player ratings

Did Townsend's goal see him beat Kane and Rooney to top marks?
Danny Higginbotham: An underdog's tale of making the most of it

An underdog's tale of making the most of it

Danny Higginbotham on being let go by Manchester United, annoying Gordon Strachan, utilising his talents to the full at Stoke and plunging into the world of analysis
Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police

Steve Bunce: Inside Boxing

Audley Harrison's abusers forget the debt he's due, but Errol Christie will always remember what he owes the police
No postcode? No vote

Floating voters

How living on a houseboat meant I didn't officially 'exist'
Louis Theroux's affable Englishman routine begins to wear thin

By Reason of Insanity

Louis Theroux's affable Englishman routine begins to wear thin
Power dressing is back – but no shoulderpads!

Power dressing is back

But banish all thoughts of Eighties shoulderpads
Spanish stone-age cave paintings 'under threat' after being re-opened to the public

Spanish stone-age cave paintings in Altamira 'under threat'

Caves were re-opened to the public
'I was the bookies’ favourite to be first to leave the Cabinet'

Vince Cable interview

'I was the bookies’ favourite to be first to leave the Cabinet'
Election 2015: How many of the Government's coalition agreement promises have been kept?

Promises, promises

But how many coalition agreement pledges have been kept?
The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

The death of a Gaza fisherman

He built his own reef, and was fatally shot there by an Israeli gunboat